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Legislative Updates

CBO releases report on possible changes to federal retirement

The Congressional Budget Office (CBO) has released a report analyzing five possible changes to the federal retirement system and their impact on the budget. The report comes at the request of Rep. Trey Gowdy (R-SC), chairman of the House Oversight and Government Reform Committee, following interest from both the Trump Administration and House Republican lawmakers in examining federal cost-saving measures.

Of the reviewed options, three would change the existing pension plan, the Federal Employees Retirement System (FERS), while the other two would replace the pension plan with larger employee contributions to the Thrift Savings Plan (TSP). From the linked report (above), here is a summary of the five possible changes.

Change the pension plan. Three options would change the terms of the FERS pension:

  • Option 1 would increase the FERS contribution rate to 4.4 percent for current employees (from 0.8 percent for employees hired before 2013 and from 3.1 percent for employees hired in 2013), saving the government $47 billion between 2018 and 2027.
  • Option 2 would decrease the FERS contribution rate to 0.8 percent for all employees (from 4.4 percent for employees hired after 2013 and from 3.1 percent for employees hired in 2013), costing the government $32 billion between 2018 and 2027.
  • Option 3 would decrease FERS pensions by basing the retirement benefit on the five years of highest salary (high-5), instead of three years of highest salary (high-3), saving the government $3 billion between 2018 and 2027.

Replace the FERS pension with larger government contributions to TSP for new employees.

  • Option 4 would eliminate the FERS pension, increase the government’s automatic TSP contribution to 8 percent of salary, and require the government to match employees’ contributions up to an additional 7 percent, costing the government $79 billion between 2018 and 2027.
  • Option 5 would eliminate the FERS pension, increase the government’s automatic TSP contribution to 10 percent of salary, and eliminate the government’s matching contribution, costing the government $58 billion between 2018 and 2027.

While the CBO did not recommend any one option over another, the report’s publication serves as reminder of Congress' ongoing attempts at civil service reform. The 2018 budget requests from the Trump Administration and from the House Budget Committee included changes to the federal retirement system in an effort to expand federal cost savings, among other budget-cutting attempts. NALC opposes such requests and any attempts to cut the benefits of letter carriers, postal employees and federal employees.

It is important for all letter carriers to recognize how vulnerable their retirement plans are and how important it is to contact members of Congress in the House and Senate now and through the end of September. Check NALC’s Budget Battle 2017 webpage for information on what’s on the table, and what you can do.

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